The worst now appears to be over for hotels located in energy-reliant markets in Alberta, Saskatchewan, and Newfoundland. In 2017, oil prices have gained ground and appear to have stabilized at a stronger position, and the worst of the aggressive layoffs and cost-cutting in the energy sector is behind us. Oil prices are projected to increase because demand continues to grow while the supply glut that had persisted from late 2014 through 2016 has been curbed through an OPEC agreement to cut production. With the stronger prices, energy companies are returning to growth mode: capital spending is on the rise, the number of active rigs is climbing, and the focus has switched to strategic hiring rather than firing. This bodes well for hotel markets that rely on activity in the energy sector for a large portion of their business.
As energy markets rebound, these lodging markets will revive and once again become desirable to hotel investors, especially since there is strong performance potential going forward. Even so, the path forward for these markets is contingent on a variety of factors, and there are risks that are special to energy-reliant lodging markets that investors need to thoroughly understand.
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